One of the fundamental dynamics of commodities markets has being turned upside down, thanks in part to Donald Trump.
Industrial metals prices and the dollar are rising in tandem on expectations that U.S. economic growth and inflation will accelerate during Trump’s presidency. Usually, they move in the opposite direction as the dollar’s strength makes commodities, which are mostly denominated in the currency, more expensive for buyers outside the U.S.
The trend is so rare that it’s only happened a handful of times in the past decade, and it’s one of the many reasons that mining companies such as Glencore Plc are rebounding. The commodities giant is benefiting from lower costs and higher metal prices at its zinc operations, and is on track to resume paying dividends next year as part of a broader turnaround plan.
“Post-election, we’ve seen markets rotate away from defensive investments, seeking growth,” Tom Price, a metals analyst at Morgan Stanley in London, said by phone. “The U.S. dollar’s lifted, and so has demand for dollar-priced assets like commodities.”
The Federal Reserve said on Wednesday that inflation expectations have tightened and conditions in the labor market are strengthening. U.S. President-elect Trump has pledged to enact growth-fueling tax cuts and infrastructure spending after being sworn into office.
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